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M&M's EV business can spring a positive surprise, taking the shares higher: HSBCHSBC is of the view that aided by production-linked incentive (PLI) benefits, M&M's profitability can be even higher and may catch up with the internal combustion engine (ICE) variant.By Shloka Badkar   June 5, 2025, 8:48:52 AM IST (Published)2 Min ReadMahindra and Mahindra's (M&M) Ltd. shares have an upside potential of 14% from current levels as the automaker's profitability from its Electric Vehicles business can surprise positively, brokerage firm HSBC wrote in a note on Thursday, June 5.

HSBC has retained its "buy" rating on Mahindra & Mahindra with a price target of ₹3,470 per share. The stock ended the previous trade session at 3,051 apiece.

The "buy" recommendation stays as HSBC sees upside catalysts from tractor, SUV and battery electric vehicle (BEV) incremental sales as well as potential margin expansion and improving EV profitability.

The brokerage believes that margins of M&M's Electric Vehicles business can potentially improve to mid-single digits over the next 12-18 months.

It is of the view that aided by production-linked incentive (PLI) benefits, M&M's profitability can be even higher and may catch up with the internal combustion engine (ICE) variant.

However, HSBC said that in the medium term, taxation changes are key. Also, low EV sales are a key downside risk, it added.

HSBC said that the medium-to-long-term outlook for M&M has more twists.

"Autos is the largest contributor to manufacturing GDP in India and the exchequer earns around $35 billion of GST every year from the industry. This is significant for the fiscal math of India. As GST normalises on EVs, prices will rise from current levels," HSBC said.

However, it's reasonable to assume by then that costs will come further down and ICE costs would have increased due to impending emission norms, the HSBC note said.

Giving an example of an XEV 9e SUV EV owner who saves around ₹70,000 to ₹80,000 per year compared to an ICE variant, HSBC said that as range anxiety and resale value concerns subside, it believes EV customers would be willing to pay around ₹2.5 lakh to ₹3 lakh higher for an EV compared to ICE variants.

HSBC is valuing M&M's core business at 16 times its estimated Enterprise Value to EBITDA for financial year 2027.

A total of 40 analysts have a "buy" rating on Mahindra & Mahindra while two have a "hold" rating on it. The stock has no "sell" ratings.

M&M shares ended 0.15% higher at 3,051 apiece during the previous trade session. The stock has gained nearly a percent in the past month.

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